WisPolitics Budget Blog

During a 25-minute address this morning to the WEAC convention, Gov. Jim Doyle urged the educators to get out the vote while giving a dire economic forecast for the state.

Doyle noted the "tremendous progress" the state has made in the last six years to reduce the $3.2 billion deficit he inherited while protecting education funding.

But Doyle said the $3.2 billion deficit he faced in his first term "is going to look pretty good to us compared to what we're looking at."

He said the Bush administration created "an economy based on make-believe," and the collapse of the economy will have serious consequences for the state.

"The Republicans in Washington have done it to us once again," he said.

The governor said the state will face in the next year to 18 months "a challenge ... like we have never faced since the Great Depression."

"I'm going to have to ask everybody in the state to make sacrifices again," Doyle said, saying that the state will have to focus on "principal priorities."

When Doyle announced two weeks ago that the deficit could reach $3 billion or more in the next biennium, he didn't rule out cuts to education.

The state's new commerce secretary said today that recent state budget numbers may have underestimated the size of a potential deficit.

"The governor said we have a $3 billion dollar shortfall. I think he easily could have said $4 billion," Commerce Secretary Richard Leinenkugel told the Wisconsin Economic Development Association at a conference in the Wisconsin Dells Tuesday.

The former beer company executive said the state is facing tough times.

"State government is in a hiring freeze. We're putting together a 10 percent budget reduction. The warning bells went off in August. Sales tax receipts were down 10 percent, income tax down 4 percent. We've seen a further slowdown in September, and October will not get any better," Leinenkugel said.

To counter the tough economy, Leinenkugel offered the Doyle administration's proposal to retain existing businesses, speed up tax breaks for "angel investors," and promote what he termed "Next Generation Manufacturing."

Administration Secretary Michael Morgan announced Friday that all new hires must go through the DOA due to the impact of the faltering national economy on state finances.

"With the increased pressure on the state budget from a slumping national economy," Morgan told state agencies, "Governor Doyle has directed me to serve as the review and approval authority for all state agency staffing actions."

See the press release:
http://wispolitics.com/index.iml?Article=139874

Gov. Jim Doyle said today he'd welcome another federal economic stimulus package that includes aid for states -- a move gaining momentum in Congress.

Doyle declared last week that the state facing a potential budget deficit of $3 billion or more.

"We really do need the help," Doyle said today, explaining that when the national economy falters, the state not only loses revenue, but sees increased costs for social services, unemployment compensation and health care. "All of those go up when the economy goes down. The burden really falls on the state."

Doyle, who was in Franklin for a ribbon cutting ceremony, said if another stimulus package is passed, he hopes it directs money to health care costs shared by states and the federal government, as well as infrastructure improvements.

"I hope that where Congress is going is that instead of just giving money away, they in fact are really focused on how you get that money out in ways that really create jobs for people," Doyle said.

Doyle said it's still too early to tell what the budget deficit will be, but that it will "certainly be $3 billion or more."

"We still haven't seen the latest revenue figure for the months that have been really, really hard hit," Doyle said. "As I said earlier, it's going to be bad. It's going to be really bad."

Doyle said that while the deficit will be hard on the state, it's important to remain focused on what the state can do to continue building the economy and keep supporting growth in Wisconsin.

The state deficit could reach more than $3 billion in the next biennial budget if a national recession continues into 2010 as pundits predict, Gov. Jim Doyle said.

"Our economic outlook in this state is changing with the national economy," Doyle said. "We don't know where the bottom is for the national economy. We don't know what the full effect is going to be by any means."

Doyle said the deficit for the next biennium "could grow well beyond ($3 billion) if the nation's economy continues to spiral downward."

Doyle said he has instructed departments to cut another 10 percent from their operational budgets. Those reports are due Nov. 17. While he admitted sometimes those mandates are treated merely as exercises by the agencies, "This time I think everybody understands we really mean it."

The guv said agencies face "deep cuts" in the next budget.

"You can't say anything is off limits," Doyle said, including K-12 education.

The governor said he isn't calling for a hiring freeze, but the administration will "look very carefully at every position that comes along." Doyle also said some programs, such as expanding BadgerCare Plus to childless adults, could be put on hold until the economy stabilizes.

Doyle said his goal is to balance the budget without major tax increases but did single out the hospital assessment as a place the state could go to increase revenues.

Listen to the news conference:
http://wispolitics.com/1006/081015doyleeconomyfinal.mp3

Senate Minority Leader Scott Fitzgerald, R-Juneau, said the timing of Doyle's announcement raised a lot of red flags, suggesting the governor could be painting a "doom and gloom" picture to voters as they get ready to cast ballots. And it could lead to a pitch by the governor, if Dems gain control of the Assembly and retain the Senate, for a potential tax increase, Fitzgerald said.

A spokesman for Gov. Doyle called the charges "absurd" and wondered if Fitzgerald expected people "to ignore what's going on with the economy."

"It's clearly political," Fitzgerald said, saying Doyle was looking for another "bad headline" before the election. "It's done to further the Obama stuff that if the economy is falling apart, vote for Obama."

Fitzgerald said that agency requests that appear to be the basis for the deficit projection "are nothing more than inflated numbers" and don't reflect what the final budget will be.

"The timing is suspicious," Fitzgerald said. "It is orchestrated in a way that it could open the door for some type of positioning to soften up people for a income or sales tax increase."

Despite the governor asking most of them to keep their budget requests flat, state agencies have requested at least an additional $2.3 billion in GPR spending in the upcoming 2009-11 budget, an 8 percent increase over their base years doubled, according to a review by WisPolitics of agency requests.

The tally comes from 50 agency budget requests that had been submitted to the Department of Administration as of Tuesday. The agency requesting the biggest percentage increase is the Department of Veterans Affairs, which is seeking a 68 percent increase in GPR, from $4.7 million to nearly $8 million.

Insiders are predicting another tough budget year, though they point out that the requests are just that at this time and are likely to be whittled down. Adding to the uneasy feeling is the international credit crunch and its impact on a slowing economy. So far Wisconsin has fared better than other parts of the country, but recent events and a LFB-projected structural deficit of nearly $1.7 billion for the next biennium would appear to dictate cautious budgeting.

Rep. Kitty Rhoades, R-Hudson, co-chair of the Joint Finance Committee, said it wouldn't be fair at this point to say that the 8 percent GPR increase request is made up of all new spending.

"What you have to look at in order to understand what the number means is caseload enrollment, particularly in entitlement programs where you have no choice, and cost to continue," she said.

Gov. Jim Doyle released an outline of his major budget policies to agency heads in late June. Doyle asked agencies to assume zero growth in overall GPR appropriations in each fiscal year during the 2009-11 biennium over the 2008-09 adjusted base year.

In his memo, Doyle exempted some agencies and programs, writing, "Exceptions will occur only for K-12 school aids; required cost-to-continue needs for the state's institutions, i.e., the Department of Corrections and the Department of Health Services institutions; entitlement and related assistance programs in the Department of Health Services (e.g., Medical Assistance), the Department of Children and Families' Division of Prevention and Permanence, and the Department of Workforce Development's Division of Vocational Rehabilitation; the University of Wisconsin System instruction and research activities that are focused on economic growth; and housekeeping adjustments like standard budget adjustments, fuel and utilities, and debt service."

DOA and Doyle's office declined to comment on the budget requests, citing a Nov. 20 report from the administration that will include both the agency requests and new revenue estimates.

Legislative Fiscal Bureau director Bob Lang said if the GPR requests are granted in total, it could widen the state budget deficit. But he doubted they will come through intact.


"He's going to produce a balanced budget," Lang said of Doyle.

According to the LFB, 2007-09 budget requests from agencies exceeded the '06-07 base year amounts by 8.1 percent, or about $2.1 billion.

So far, GPR requests overall rose from the base year figure of more than $27.7 billion to more $30 billion.

The largest requested increase dollar-wise comes from the Department of Public Instruction, which Doyle exempted from his zero-growth edict. DPI requested $12.1 billion in GPR, $861.8 million than the base year doubled, a 7.7 percent increase.

The state's shared revenue program is requesting a $330 million bump, rising 8.4 percent to $4.25 billion if the entire request is left intact.

Here are more increase requests:

--The Department of Health Services is seeking a $620 million jump in GPR appropriations, a 12 percent jump to more than $5.6 billion in GPR. Of that, $580 million is for Medicaid and BadgerCare benefits, according to a DHS spokeswoman.

--The new Department of Children and Families, which split off from the DHS in July, is looking for $92.8 million in additional GPR, a 14.8 percent increase. The agency's total GPR request is $721 million. The additional dollars requested will be used to continue operating child welfare programs at their current level, including $51 million for continuing Milwaukee Child Welfare, and $41 million for continuing county child welfare programs throughout the remainder of the state.

--The Department of Corrections is seeking an additional $166 million in GPR, a 7.5 percent increase, raising the department's GPR appropriation to $2.37 billion.

--The University of Wisconsin System seeks $140 million in additional GPR, a 6 percent increase. If the request is granted in full, the UW System's GPR appropriation would be $2.44 billion.

See WisPolitics list of GPR requests compiled as of Tuesday:
http://www.wispolitics.com/1006/081003GPRbudget.xls